Im calling it.....
- Thread starter Dr House
- Start date
My gripe with house prices is that it causes gross, unfair inequality.
To be clear, I'm not a lefty, I don't think we should increase taxes and benefits, I'm actually quite right leaning economically. I have no problem with inequality if it occurs because some people contribute more to society and are compensated for it (and then accordingly taxed). But massive house prices increases where people earn more money that well outstrips a professional salary - that I have a problem with. People are being rewarded with massive equity bonuses for contributing nothing to society. Meanwhile the rest of us pay rents that are often higher than equivalent mortgage payments and get no equity and have to deal with our diabolical renting system.
Call me a whining millenial as much as you like
you're a whining millennial
I don't have an issue with someone happening to profit because their home went up in value, they took the risk they get the reward - if it is inequality you're interested then it is perhaps more the inherited properties that ought to be targeted with lower IHT thresholds and further crackdowns on trusts
It's been happening for several years now. When I first started my career in '06 I thought banking salaries were high... now they're just outrageous.
They have. I'd be surprised if one of our candidates has a current base salary within 20% of '06, taking into account inflation. In many cases it's over 100% increases. Overall comp is certainly down somewhat, salaries on the other hand have developed significantly.
What do you mean "took the risk" ? The problem with this country is that everyone views homes as an investment or a money making scheme. The only "risk" to buying yourself a home is whether or not you can pay the mortgage. Whether or not you make money on it shouldn't even be a factor
When you buy a home you take on risk - if it drops 50% or rises 50% that risk is yours.
It is very much a factor - if you think prices are going to drop as the OP clearly does then it could be quite sensible to avoid buying at that point in time thus avoid that risk.
It is very much a factor - if you think prices are going to drop as the OP clearly does then it could be quite sensible to avoid buying at that point in time thus avoid that risk.
No. You're talking like an investor. If someone buys a house and it drops in value it has zero impact on them. They pay their mortgage, they live there. Zero impact. You buy a new car and as soon as you drive it off the forecourt it loses value. People don't get as upset about that? But no, houses must make money
No. You're talking like an investor. If someone buys a house and it drops in value it has zero impact on them. They pay their mortgage, they live there. Zero impact. You buy a new car and as soon as you drive it off the forecourt it loses value. People don't get as upset about that? But no, houses must make money
houses don't have to make money and a house dropping in value can certainly have an impact
suppose you buy your first home, a flat for 300k with say 80k as a deposit - suppose it drops to 200k - you're now in negative equity and in a worse position than if you hadn't bought... suppose you want to start a family and move to a bigger place or move location for work or to be close to an elderly relative... well your deposit is gone and you owe a further 20k so you can't very easily do so now..
assuming that property prices are irrelevant because that is just for investors etc.. is simply naivety
if you buy a property you are still in a sense an 'investor' anyway - pretending that you aren't doesn't shield you from reality - interest rates can rise and fall, property prices can rise and fall
100% this. Your house price falls in value and you can find yourself trapped and unable to move or even negotiate a better mortgage rate because your LTV has hit a wall. Been there myself.
London and the South East is a law unto itself.
Wealthy foreigners buoyed by low interest rates and now a weak pound buy in Mayfair
Those who used to be able to afford Mayfair move out to Kensington
Those who used to be able to afford Kensington move out to Clapham
Those who used to be able to afford Clapham move out to Brixton
Those who used to be able to afford Brixton move out to Croydon
Those who used to be able to afford Croydon move out to the suburbs
Those who used to be able to afford the suburbs move somewhere way out but with fast and expensive train links (furthest reaches of the Home Counties, Rugby, East Anglia etc.)
And so the cycle continues until London becomes unattractive to foreign wealth.
Wealthy foreigners buoyed by low interest rates and now a weak pound buy in Mayfair
Those who used to be able to afford Mayfair move out to Kensington
Those who used to be able to afford Kensington move out to Clapham
Those who used to be able to afford Clapham move out to Brixton
Those who used to be able to afford Brixton move out to Croydon
Those who used to be able to afford Croydon move out to the suburbs
Those who used to be able to afford the suburbs move somewhere way out but with fast and expensive train links (furthest reaches of the Home Counties, Rugby, East Anglia etc.)
And so the cycle continues until London becomes unattractive to foreign wealth.
So much confusion here.
- Interest rates make no difference when you buy in cash. London has the lowest debt to value ratio in the country.
- Kensington is more expensive than Mayfair. It is the most expensive area in the UK.
- Brixton is no further out than Clapham
- Croydon is one of the last bits before you leave London. The suburbs start well before this, arguably Clapham is the start of the suburbs.
- if you used to be able to afford the suburbs you probably aren't going to start commuting from Rugby. Maybe Woking or some other town near London.
I wonder if a lot of that debt to value ratio is better explained by big historic price rises rather than people buying in cash. I happened to have a healthy deposit when I bough but even if I'd bought with a tiny deposit I'd have been able to re-mortgage at a much better LTV within 2 years. As it stands not I've got approx 2/3rds equity in my flat and a big chunk of that is simply thanks to it increasing in value at a very nice rate after buying it.
That certainly helps. We have very good transaction numbers in London which allows this ratio to keep up to date. Big deposits and cash buyers are helping here too. There is low supply of new properties which means the market is self sustaining without requiring UK "average" earners to support the market. It works well with a couple of London average to above average earners depending on the area with a good deposit. Even then it is still challenging as demand is high. What it demonstrates is the market is very stable and safe rather than in a bubble. Very little debt is driving this market which wasn't the case in other property bubbles like Tokyo where debt was equal to or exceeded value.
Very little debt, maybe. Lots of filthy cash though, filthy, bloody, drug-soaked cash. Well at least the top of the market anyway.
Perhaps for the minute amount of transactions at the top end. Foreign money is still a tiny amount of what is in London. 10% in the top end of the market and 3% in the rest.
People with lots of cash leverage cheap debt and don't pay cash. They make their cash work for them. That's why imterest rates matter.
The locations fair play - perhaps I should have just said foreign buyers moving into the centre push everyone out. And most certainly plenty of people move much further out to my last point. Personally Dulwich, Woking then Wye. Examples of people I work with include Islington, Surbiton then Rugby someone did Clapham, Byfleet now Chichester and then the guy who sits next to me did Balham, Esther and now somewhere near Ipswich. All because modern ways of working and less draconian obsession with set working patterns means lots of house for your London earned £ further out.